In a pivotal legal battle that could shape the future of New Jersey’s cannabis industry, the State’s Appellate Division recently heard oral arguments for three consolidated appeals involving the 2019 Cannabis Licensing Request for Applications (RFA). The firm represented NJ Holistic Health, one of the appellants (A-001326-21), challenging the scoring of its application by the NJ Cannabis Regulatory Committee (CRC). These appeals closely mirror a precedent-setting decision from 2020, In re Application for Medicinal Marijuana Alt. Treatment Ctr. for Pangaea Health & Wellness, LLC, 465 N.J. Super. 343 (App. Div.), which challenged the 2018 Cannabis Licensing RFA.
The crux of these appeals lies in the issue of “relative error.” Relative error is a metric measuring, among other things, the extent to which a scoring computation by multiple reviewers may be mistaken, ranging from zero percent (complete consensus) to 100 percent (total disparity). A high relative error indicates significant discrepancies in the scoring process, casting doubt on the integrity of the results. In Pangaea, the Court emphasized that when multiple individuals assess the same criteria using standardized tools, their scores should align closely, resulting in a relative error close to zero.
To illustrate this concept, the Court employed a vivid analogy involving baseball umpires. If four umpires watching the same play offer radically different judgments, chaos ensues, and the game’s outcome becomes questionable. The appellants in the recent appeals argued that the CRC’s scoring for the 2019 RFA suffered from relative errors exceeding 50%, sometimes reaching as high as 80%. Such discrepancies raised serious concerns about the fairness and accuracy of the scoring process.
Furthermore, appellants underscored that despite the CRC’s assertion of implementing a “Quality Control Review Process” for the 2019 scoring, not a single score was altered, even when glaring relative errors were evident. This echoed the Court’s sentiment in Pangaea, which stated that some scores simply “don’t compute.” These irregularities in scoring have profound implications, not only for the appellants but also for the entire cannabis industry in New Jersey.
The cannabis industry in the State is rapidly evolving, and the CRC plays a pivotal role in ensuring a fair and transparent licensing process. The 2019 RFA, and by extension, the CRC’s scoring methods, directly influence which businesses are granted licenses to operate in this burgeoning market. The participants in the industry, as well as the public, rightly expect the licensing process to be impartial, transparent, and devoid of arbitrary judgments. The Compassionate Use Act, enacted by the legislature, reflects the State’s commitment to these principles. However, the concerns raised in the appeals suggest that these principles may not have been fully realized in practice.
The firm is optimistic that the Court will uphold the principles established in Pangaea. We are advocating for a reversal and remand to rectify the issues that have tainted the scoring process. Such a decision would not only ensure fairness for the appellants but would also reaffirm the state’s dedication to preserving the integrity of its cannabis licensing system.
The outcome of these appeals carries significant weight as the cannabis industry in New Jersey continues to expand. It will set a precedent for future licensing rounds and shape the trajectory of the State’s cannabis market. The Court’s decision in this case will serve as a litmus test for the effectiveness of the regulatory framework governing this burgeoning industry.
The Appellate Division’s deliberation on these appeals underscores New Jersey’s commitment to maintaining the highest standards of fairness and transparency in its cannabis licensing process. Stakeholders across the State and beyond are closely monitoring the legal proceedings, recognizing that the outcome will have a lasting impact on the future of New Jersey’s cannabis industry. The Court’s decision will determine whether the principles of integrity and accuracy, enshrined in the Compassionate Use Act, will be upheld in practice and whether the cannabis licensing system will continue to evolve in a just and equitable manner.
For more information, please contact Joshua S. Bauchner, chair of the firm’s Cannabis & Psychedelics practice group, at jbauchner@mblawfim.com or (973) 607-1269, or visit us here.